Blog

California Loan Modification Attorney Blog

Loan Modification Expert, Michael Gaddis, J.D., recently discussed the importance of being realistic when attempting to obtain a loan modification or short sale from lenders such as Wells Fargo, Bank of America, Nationstar, Select Portfolio Servicing, etc. during his weekly radio show on San Diego’s KCBQ AM1170 The Answer. Michael Gaddis, J.D. stated during the show that he receives numerous calls every week from homeowners throughout the State of California seeking his advice on loan modifications. Loan modifications have become more and more difficult to obtain in the past year or two. The problem for homeowners is that increasing property values have decreased the risk of loss to investors which, in turn, decreases their motivation to provide overly aggressive loan modifications. Another problem is that many homeowners have already received one or more loan modifications which narrows their options. Every loan modification scenario needs to be addressed subjectively, on a case by case basis. Out of 10 people that contact Michael Gaddis, J.D., he is only able to help, on average three to four. Another huge problem is that homeowners have unrealistic expectations about what can be achieved through a loan modification. Unfortunately, many homeowners just cannot afford to stay in their home no matter what the lender does. Michael Gaddis, J.D. points out that when faced with the proposition of losing their home, homeowners become desparate allowing themselves to become susceptible to scammers that take advantage of desparation. Michael Gaddis, J.D. warns homeowners to not believe in leprachauns and unicorns. They do not exist. Michael Gaddis, J.D. has been assisting homeowners with loan modifications since 2008 and since that time has helped over 2,500 homeowners keep their homes. When it comes down to it, loan modifications come down to mathematics. Resolutions that defy math have an extremely low probability of success. Michael Gaddis, J.D. encourages homewners to take emotion out of the equation and look at their housing situation as if it where a business decision.

Watch the video and you will see just how passionate Michael Gaddis, J.D. is about helping homeowners make the right choice when faced with losing their home. For more information about Michael Gaddis, J.D. please visit www.californialoanmodificationattorney.com.

Although the peak of the housing crisis is in the rearview mirror, Notice of Defaults (“NOD”) and Trustee Sales continue for many homeowners. The question is “What do you do when you receive a NOD?” One thing is for sure, sticking your head in the sand like an ostrich and pretending it is not happening is not a productive course of action. In California, a NOD represents the beginning of the foreclosure process. Lenders (all lienholders) have to wait 90 days from the issuance of the NOD before they can issue a Notice of Trustee Sale (“NOTS”) and the sale date has to be 21 days from the date of the NOTS. So the minimum amount of time that a homeowner has from the Date of the NOD to earliest date that the property can go to sale is 90 days + 21 days. So pretending that nothing is happening is not an efficient use of time. Additionally, chasing after “leprechauns” and “unicorns” can be equally unproductive and, in most cases, detrimental to a homeowner’s situation. By leprechauns and unicorns I mean paths of action that have an extremely low probability of success. These paths of actions are usually driven by emotions such as desperation and false hope.

The threat of losing a home can be an extremely emotional time and emotions such as fear and panic can drive out logic and patience and begin driving decision making. The key once a NOD is received is to not panic. Remain calm and take a few deep breaths. The next step is to seek out someone experienced with foreclosure and lender issues. Homeowners facing foreclosure should not seek out companies or individuals that merely tell them what they want to hear. Believe me, they are out there. They will tell you everything will be okay; that you will be able to keep your home; that they are the most experienced at handling your situation; and that you have nothing to worry about. Homeowners should immediately hang up the phone on anyone that paints a rosy picture of the process. The truth is that obtaining a loan modification or stopping foreclosures is more difficult than ever. Not impossible, just very difficult. In order to determine whether or not you have a chance of success of keeping your home a thorough review of your situation must be made.

So, what are the options? First, there are loan modifications. Loan modifications are adjustments to the terms of your existing loan. Loan modifications are subject to a Net Present Value (“NPV”) analysis which is essentially a computer program that determines whether giving you a loan modification is in the best interests of the investor of your loan. The NPV takes into consideration all variables associated with your situation such as months delinquent, current market value of the home, current interest rate, proposed interest rate, current remaining term of the loan, proposed term of the loan, etc. If the NPV issues a PASS that means that your loan is worth more to modify than to foreclose. If the NPV issues a FAIL that means that the investor feels that less money will be lost via a foreclosure. Fighting for a loan modification in 2016 can be tricky and if you are going to have someone help you make sure that they know what they are doing or you might lose precious time. Another option is to file a Chapter 13 Bankruptcy. This is a viable option IF you are able to begin paying on your loan at its present terms AND if you are willing to pay a trustee payment on top of the current payment. I suggest you do not let emotion get in the way when analyzing whether a Chapter 13 makes sense. A third option to avoid foreclosure is to short sell your home. I know a lot of people do not like that option BUT sometimes it is the best option. Plus, with the HAFA incentive as high as $10k, you might have a financial reason to cooperate with the short sale process. Additionally, a short sale will allow you to control the “chaos” of the foreclosure process. Most lenders will work with homeowners and allow the property to be sold via short sale which can potentially 1) allow you to stay in the home longer (short sales take on average 3-6 months) and 2) make it easier for you to qualify to purchase a new home in the future. Another option is to give the house back to the lender via a Deed-in-Lieu (“DIL”). DILs will work provided your title is not clouded with issues such as junior liens, solar liens, judgment liens, HOA assessments and/or liens, etc. Finally, you could always try and file a lawsuit against the lender. This option can be costly and the probability of success can be very low. However, sometimes homeowners want to exhaust all options prior to accepting that the reality that there might not be a way to save the home.

My suggestion is to 1) seek out competent assistance and 2) think of your situation as a business decision. Keep emotion out of the process as much as possible.

For more information on foreclosure alternatives please contact Michael Gaddis, J.D. at Michael@MichaelGaddis.com or by calling 760-692-5950. Michael Gaddis, J.D. helps homeowners throughout the State of California.

I wanted to start out 2016 by sharing my recent experiences with assisting homeowners in their efforts in obtaining a loan modification and/or preventing a foreclosure. There is no doubt about it, loan modifications are becoming more and more difficult to obtain. Ever increasing property values and appreciation factors in lenders’ Net Present Value (“NPV“) calculations are causing more and more homeowners to be denied loan modifications. Every day I receive three to five calls (or emails) from homeowners desperately looking for clarity on their “REAL” options. Most of these homeowners are at the end of their emotional “rope.” The stress and uncertainty of dealing with their housing situation has affected them emotionally, physically, in their relationships, in their workplace, etc. Most of the homeowners that contact me have already tried to modify directly with their lender, or with the help of a nonprofit, or with the help of litigation, or with the assistance of a “Loan Modification Assistance” company or with the assistance of another attorney. I am usually a homeowner’s last hope. Homeowners typically find me after hours and hours of Internet research. These homeowners find my blogs, copies of the mods that I have obtained for my clients that I post on my website, YouTube videos, etc. One of the first questions that I ask homeowners that call me is whether they want me to tell them the truth or a lie. Homeowners are usually surprised by this question. The reason I ask this question is because I am not going to tell them about leprechauns and unicorns. I am going to tell them the truth. Loan modifications are very difficult, even for me, so I do not want to provide someone with false hope, especially when I know that the probability of success is very low. With that being said, loan modifications are still attainable, but the probability of success can only be determined after a thorough review of each individual situation. In other words, I need to review them case by case.

I understand the enormous amount of stress and pressure that homeowners are under when dealing with the imminent threat of losing their home. I would make the following suggestions to homeowners facing foreclosure in 2016:

Do not wait until the last minute! For whatever reason some homeowners wait until the LAST possible minute before seeking assistance. Stopping Trustee Sales is becoming more and more difficult. I have literally had homeowners call me to tell me that they have sales at 9AM the next day. If you are a homeowner do yourself a favor and do not wait until the last second. I promise you it will not end well.

Take detailed notes when communicating with your lender! At a minimum write down the date, time and name of the person from the lender you are speaking to. Ask questions like “Is my loan modification application with an underwriter?” “Are you missing any documents?” “Is there a scheduled sale on my property?” Make sure that you take detailed notes and write down everything that you are told. Do not assume anything!

Follow up at least 3x per week! I do not care what the lender tells you, you need to call, at a minimum, Monday-Wednesday-Friday. You need to ask the same questions every call. Do not assume that you have already been told the information and do not need to ask again.

Do not become overly friendly with your dedicated point of contact! Your dedicated point of contact is not your friend. No matter how nice or friendly they may seem, they are not your friend. Do not assume that they have your best interest at heart.

Do not trust what your dedicated point of contact is telling you! If your dedicated point of contact attempts to tell you how to structure your income or your package BE CAREFUL!!! Dedicated points of contact do not have any specific information related to how to achieve a loan modification. It is amazing how many people call me and tell me “I don’t understand why I failed, my dedicated point of contact told me exactly what to do!”

If you are using a 3rd party to assist you, keep updated on what is going on! If you have a 3rd party working on your loan modification file make sure that you are receiving AT LEAST weekly updates. Do not just pass your file to them and forget about it.

Pay attention to your mail! Make sure that you are reading all of the mail that you receive from your lender. Some homeowners do not want to read it. Do not ignore your mail!

I could go on and on giving suggestions but I think you get the point. You need to be vigilant and prudent when seeking a loan modification.

Loan modifications are not the only loss mitigation tactic that you could utilize to resolve your housing situation. You could file a Chapter 13, seek a repayment plan, obtain assistance from Keep Your Home California, seek a deed in lieu, pursue a short sale, etc. The most important thing is to weigh the pros and cons of each and determine the best and MOST REALISTIC option. I know that emotions can sometimes cloud reality so you should really do your best to look at your situation objectively.

The Law Offices of Michael Gaddis, APC recently obtained a loan modification from SunTrust for homeowners located in Oxnard, CA. This loan modification was EXTREMELY difficult due to the fact that the loan was in a Mortgage Backed Securities (“MBS”) pool. The problem was not SunTrust, in fact, SunTrust worked diligently with Michael Gaddis to find a proposed solution. MBS loans are one of the most difficult types of loans to modify. The underwriting guidelines that provide the rules for how the loan servicer can modify a loan in the pool are very limited. MBS loan pools do not typically participate in HAMP/MHA so borrowers attempting to obtain MBS loans are limited to the investor based underwriting guidelines. Sometimes borrowers like to blame the servicers for the issues that they incur during the loan modification process, and although the servicers do deserve much of the blame heaped upon them, sometimes they are not responsible for the issues that are preventing a loan modification approval. In this case, the underwriting guidelines would not allow a decrease in interest rate or an amortization extension. The guidelines were very restrictive and SunTrust was just as frustrated as Michael Gaddis. However, SunTrust told Michael Gaddis that they were going to have a new Net Present Value (“NPV“) tool and that, although the investor had not approved use of the tool yet, that they would run this borrower’s financials through the new NPV and then, if it passes, try to get the investor to approve the results. When SunTrust ran the borrower’s financials through the new NPV it passed and created a step-rate modification with an initial interest rate of 2.65%, well below the 6.75% note rate. SunTrust then attempted to get approval from the “investor” who they claimed was Wells Fargo. After weeks and weeks of trying SunTrust notified Michael Gaddis that the proposal from the new NPV had been denied because it did not comply with the underwriting guidelines. Meanwhile the borrower received a notice from SunTrust identifying not Wells Fargo, but US BANK as the investor. Michael Gaddis found this odd so he approached US BANK about the potential of making an exception for this borrower and allowing it to be modified or Michael Gaddis requested that US BANK move this particular loan out of this MBS pool into a different pool that would allow for the SunTrust NPV tool results. US BANK responded that they were not the investor on the loan, that SunTrust’s paperwork was incorrect. Michael Gaddis then advised SunTrust of the issue and, at the same time, approached Wells Fargo about the issue. Subsequently, US BANK followed up with Michael Gaddis and explained that they had been incorrect, that they were the Trustee of the MBS pool and that Wells Fargo was the Master Servicer. US Bank said that ultimately it was Wells Fargo that made the call regarding the MBS pool. Michael Gaddis then approached Wells Fargo AGAIN and explained what had happened and appealed to them to allow the loan modification pursuant to the terms of the SunTrust NPV. Believe it or not, they did!

So this was a case where everyone involved worked together to get the right result. SunTrust, Wells Fargo and US BANK all deserve credit for thinking outside the box and doing the right thing. This loan modification was not easy but the result was the correct result.

The clients are ecstatic to say the least. They were able to save their home. Michael Gaddis takes a lot of pride in helping homeoweners save their homes and he is very proud of this case.

Michael Gaddis is a licensed California attorney based in Carlsbad, CA. His practice is limited to assisting distressed homeowners resolve their home loan situations with their lenders. Since 2008 Michael Gaddis has helped nearly 2,000 people modify their home loans.

Loan Modification Expert and Attorney, Michael Gaddis, J.D. provides tips to those attempting to obtain loan modifications on the October 7, 2015 episode of “The Michael Gaddis Show” on San Diego’s KCBQ AM1170 The Answer. During the segment Michael Gaddis, J.D. urges borrowers to stop believing misleading advertisements as well as to face the realities of their situation. Michael Gaddis also tells homeowners to not give upfront money to ANYONE for loan modification services. Michael Gaddis, J.D. then provides tips such as 1) Beware of lenders because they are not your friends! 2)Make sure that the loan modification file is complete 3) Do not waste time 4) Follow up with the lender at least 3x per week and 4) Keep detailed notes of who you talk to as well as the date and time of the call. Michael Gaddis, J.D. also discussed things that might make a loan modification more difficult such as: Equity, owning multiple homes, being self-employed, previous loan modifications, difficult servicers and low currently scheduled payments due to adjustable interest rates or previous loan modifications.

For more information on Michael Gaddis, J.D. you can visit www.californialoanmodificationattorney.com.

Michael Gaddis, J.D., the host of “The Michael Gaddis Show” on KCBQ AM1170 The Answer, dedicated a segment to discuss foreclosure alternatives for people facing issues with their home loans. Michael Gaddis, J.D. has extensive experience helping distressed homeowners through his legal practice and wanted to share some tips for his listeners. Michael Gaddis, J.D.’s first piece of advice was for homeowners to exhaust all efforts to refinance to solve their problem prior to becoming delinquent. Loan modifications have become more and more difficult to obtain in recent years due to several reasons. First, as home values increase the incentive for investors to approve loan modification solutions decreases. Loan modifications are a loss mitigation tactic for investors and are primarily agreed to if the resulting loan modifcation is in the financial best interest of the investor. During the housing crisis most homeowners that were requesting loan modications were “Under Water” meaning that they owed more on their loan than the house was worth. As home values rebound and continue to increase resulting in fewer homeowners that are underwater, the risk to the investor is lessened. Second, equity is the enemy of loan modifications. All loan modifications have to go through some sort of Net Present Value (“NPV”) test. NPV is a computer program that takes into consideration every variable related to a particular loan modification application. If NPV issues a PASS then the loan modification is deemed to be in the best interest of the investor and a loan modification is granted. If NPV issues a Fail then the loan modification will be deemed to NOT be in the best interest of the investor. Third, many homeowners have already received a loan modification and the terms of those loan modifications are very aggressive making it extremely difficult for the lender to find a solution that is beneficial to the borrower. Fourth, many homeowners have already received 3 loan modifications. Normal investor guidelines allow for up to 3 loan modifications during the life of the loan.

The purpose of this segment was not to discourage homeowners from seeking loan modifications. The purpose was to provide homeowners with some realistic issues that might make seeking a loan modification problematic. Too many homeowners are chasing hope which, for many, is tantamount to pushing a very large boulder up a steep hill.

The Law Offices of Michael Gaddis recently negotiated the forgiveness of a charged off 2nd lien held by Bank of America. The homeowner, a resident of Valley, Center, CA, retained Michael Gaddis to negotiate a settlement and release of lien with Bank of America. The 2nd lien had an outstanding principal balance of $56,277.03 and had only recently been charged off. Bank of America is a VERY difficult servicer and negotiating settlements on 2nd liens can be nearly impossible at times. However, Michael Gaddis knew that once the underlying debt had been charged off that that a window of opportunity had been opened. Utilizing his close relationship with Bank of America Michael Gaddis approached the bank with a settlement offer. The bank reviewed the offer and after a couple of weeks Michael Gaddis was notified that there might be a possibility of getting the entire lien extinguished via the Department of Justice (“DOJ”)settlement provisions pertaining to 2nd liens. Although optimistic, Michael Gaddis continued to push the settlement while continuing to encourage his contacts to get the loan extinguished via the DOJ program. Finally, on December 3, 2014 the borrower received a notice from Bank of America stating that they had received full forgiveness of the 2nd lien. The borrowers were stunned to say the least.

As mentioned in previous posts, borrowers that have outstanding liens on their property need to try and negotiate a settlement on these liens as soon as possible. Many borrowers think that if the loan has been charged off or if they have not heard from their lender in a while that the loan has been forgiven and they are off the hook. The problem is that the lender retains a security interest in the property and most definitely will create problems for the homeowner in the future. Now is the perfect time to negotiate settlements on 2nd liens such as a home equity line of credit (“HELOC”). As the housing market recovers and the value of homes continue to rise the leverage that borrowers have against the lenders will decrease.

If you or someone you know has a lingering junior lien such as a HELOC and you are wondering what your options are please contact Michael Gaddis, Esq. at 760-692-5950 or by email at Michael@LawOfficesofMG.com.

WARNING: Attempt To Settle Unpaid Second Liens Before It Is Too Late! When the housing crisis began in 2008 and house prices began to drop homeowners desperately began trying save their homes by renegotiating the terms of their loans. Homeowners with more than one loan securing their property concentrated their efforts on modifying their 1st loans putting any junior liens on the back burner. Homeowners felt safe neglecting the junior liens because the drastic fall in home values effectively negated the ability of the junior liens from foreclosing on their property. The junior liens still had the power to foreclose, however, due to the foreclosure laws in California foreclosing on the property was not in the best interest of these junior lien holders. Many homeowners modified their first liens and then “forgot” about the junior lien. Over the years these homeowners might have received a threatening letter or two from the junior lien holders but whatever threats were contained in these letters were negated by the reality that their was not a financial gain for these junior lien holders to foreclose. Likewise, homeowners that file Chapter 7 Bankruptcy dismissed the potential threat of junior liens due to the misguided belief that a Chapter 7 discharge released the junior lien holders’ right to foreclose on the property. These homeowners failed to realize that although their personal liability to pay the debt to the junior lien holder was extinguished, the security interest on the property remained.

Now, over 6 years later, homeowners are beginning to realize that their “safety net” is disappearing. The “safety net” was the negative equity position that was preventing the junior lien holders from exercising their rights to foreclose on the property. As values increase the “safety net” shrinks. As these junior lien holders begin to reevaluate their position, the risk to homeowners that have outstanding liens on their property increases.

The best advice is for homeowners to be proactive and try and negotiate a settlement to release these liens before the increasing home values reduce their leverage position. The first problem is figuring out who is servicing the 2nd lien. Sometimes, for numerous reasons, the 2nd lien stops sending paperwork to the homeowner. Homeowners typically feel that if the junior lien holder is no longer contacting them that they have “gone away”. Rest assured that junior lien holders do not “go away”. Many times they investors on these loans will sell off the lien rights to these liens to companies that specialize in enforcing lien holder rights. These companies are able to purchase these rights at substantial discounts. They will patiently wait until: 1) the equity in the home rises enough to press the foreclosure process; 2) they are contacted for release of the lien through a short sale; or 3) they are approached for a settlement offer.

Attempting to negotiate a settlement to release the lien while leverage still exists is the most advisable course of action. As the junior lien holders position increases and the settlement amount will likely follow suit. Some loan servicers are easier to work with than others. Greentree, Real Time Resolutions and Chase will typically entertain settlement offers while Bank of America and Wells Fargo can be more challenging.

The trick is to settle the lien for as little as possible.

If you have an outstanding junior lien and would like to consult with Michael Gaddis about negotiating a settlement to release the lien please contact Michael at 760-692-5950 or by email at Michael@MichaelGaddis.com.

SPS Loan Modification Success Story

Recently I helped a homeowner living in Valley Springs, CA obtain a HAMP trial loan modification from Select Portfolio Servicing (“SPS”). This file was one of the most difficult and frustrating cases that I have ever had. I have been assisting homeowners obtain loan modification since the inception of the housing crisis. I only mention this because I want you to understand that I am extremely familiar with not only loan modifications but also the evolution of loan modifications. When this homeowner contacted me she had been attempting to modify her loan for over 6 years and was coming off of a fresh denial from SPS. The homeowner also had a Trustee Sale scheduled to occur in 20 days. I asked the homeowner to send all of her paperwork to me and then, as I always do, thoroughly reviewed her situation to determine whether or not I thought she should be able to qualify. My first impression was that she should not be having problems. Her case appeared to be a text book example for HAMP Tier 1 approval. Yet, when I looked at the SPS denial it appeared that SPS was not even reviewing the homeowner for HAMP Tier 1. I reanalyzed the Homeowners income documentation, verified the value of the home and ran my calculations. I did this 3 times. Each time I ran my calculations I became more convinced that SPS was in error. I agreed to take the homeowners case and, although I could not guarantee a result, I told the homeowner if there was ever a case I thought should pass a HAMP Tier 1 review it was this one. The homeowner agreed to retain me and I prepared and submitted a new loan modification application to SPS for review. My first obstacle was that we the loan modification submission was too close to the sale date. I had to appeal to upper management in order to get the trustee sale postponed and the homeowner’s loan modification package into review. Once in review my work began. Sure enough the first loan modification application I submitted was denied for similar reasons to that which the homeowner received. I appealed and challenged SPS on why the homeowner’s file was not being reviewed for HAMP Tier 1. I might heavy resistance so I appealed the matter up the management chain. Months past as did the constant threat of foreclosure. Finally, I was told by SPS that the reason that the homeowner was not being reviewed for HAMP Tier 1 was because the homeowner had a received a previous Trial Payment Plan (“TPP”) and that the homeowner had defaulted after making one payment. I asked the homeowner if this was true and the homeowner told me that while she had received a TPP, she never made a payment because the approved TPP payment was too high. Hearing this I went back to SPS and told them this information. Again I met resistance. I demanded to see an accounting of her payment history so that I could see where she made a trial payment and then defaulted. Of course they could not show me where the homeowner had defaulted on a TPP. Finally, they agreed that the homeowner had not missed a TPP payment, but argued that she was still not eligible for a new HAMP Tier 1 review because the HAMP Guidelines stated that if the homeowner received a previous TPP offer and did not take it the homeowner was still not eligible for a new HAMP Tier 1 review. I could not believe what I was hearing. I told them that I was familiar with the HAMP Tier 1 Guidelines and that was not what it said. I told them that the HAMP Guidelines stated that a homeowner loses eligibility when a homeowner receives a TPP and then defaults after making the first payment. Since the homeowner did not default after making the first payment the homeowner was still eligible to be reviewed for HAMP Tier 1. The response I received from SPS made me laugh out loud. SPS responded by telling me that the while what I was saying was true for the current HAMP Guidelines, the HAMP Guidelines in effect at the time were consistent with their position and the homeowner was still not eligible because she had received a TPP but never made a payment. I laughed because the newest HAMP Guidelines Handbook clearly states that each new version of the HAMP Guidelines supersedes the previous version. In this case, the new HAMP Guidelines trumped the old HAMP Guidelines thus allowing the homeowner to be reviewed for HAMP Tier 1 again. I actually cut and pasted excerpts from the Treasury Guidelines to support my position. SPS clearly was wrong for not reviewing the homeowner again for HAMP Tier 1 and finally, they reluctantly agreed to rerun her for HAMP Tier 1. Subsequent to their agreeing to rerun the homeowner for HAMP Tier 1 I received another denial from SPS. When I reviewed the denial I noticed that SPS was still not reviewing the homeowner for HAMP Tier 1. I challenged SPS again. SPS told me that they were having trouble removing a block in their computer and that they would need to figure out how to lift the block in order to rerun the homeowner’s file for HAMP Tier 1. About a month later, I was finally informed that SPS was able to properly run a HAMP Tier 1 review and that the homeowner had passed and been issued a TPP.

This file was definitely one of the more challenging files because lenders always believe that they are right and that homeowners are wrong. SPS believed that they had properly followed HAMP Guidelines and that they were 100% correct in their review of the homeowner’s file. As you can see, they were wrong. The TPP plan calls for a payment of $2,218.75 which represents a potential savings of nearly $700 a month from the homeowner’s currently scheduled payment. The trial payment begins December 1, 2014.